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Fortescue (ASX:FMG) share price rises on green energy project approvals

The Fortescue Metals Group Ltd (ASX: FMG) share price is higher after the company announced approval of green energy projects.

Fortescue is best known for being an iron ore miner, but it has plenty of green hydrogen projects in the works.

Projects approved

The Fortescue board have approved a final investment decision for the Phoenix Hydrogen Hub in the USA and the Gladstone PEM50 project in Queensland. It has also approved a green iron trial commercial plant in Western Australia.

The Phoenix hub is an 80MW electrolyser and liquefaction facility in Arizona, with production capacity of up to 11,000 tonnes per annum of liquid green hydrogen, for a total investment of around US$550 million, with first production in 2026. An “attractive” phase two development exists.

The Gladstone PEM50 project is a 50MW green hydrogen project utilising its own electrolyser technology, with a total investment of up to US$150 million, with first production in 2025.

The estimated total investment in the three approved projects is approximately US$750 million over the next three years.

Other projects have been selected to be fast-tracked by the board are: Pecem in Brazil, the Chui project in Kenya and Holmaneset in Norway.

Fortescue said it will use the first three projects to learn lessons. Success with these things could drive the Fortescue share price higher.

Green iron

‘Green iron’ refers to the end product resulting from processing iron ore into iron, without the use of fossil fuels, and instead using renewable energy.

The Christmas Creek green iron trial commercial plant will utilise green hydrogen and green electricity from solar generation, hematite and magnetite (iron) ore production capacity and existing infrastructure and technical capacity.

An investment of up to US$50 million has been approved to construct this trial commercial plant, with annual production of more than 1,500 tonnes, with first production in 2025.

Management commentary

Fortescue Energy CEO Mark Hutchinson said:

The Phoenix Hydrogen Hub establishes Fortescue in one of the most attractive energy markets in the world, facilitated by the Inflation Reduction Act.

The proximity to California, a primary heavy haulage trucking route and the most progressive US State to adopt and incentivise clean hydrogen, primes Fortescue well to deliver value into the US domestic market.

With a disciplined approach to capital allocation, we continue to target double digit project returns. This is the start of a pipeline of green energy projects we are dedicated to delivering.

Fortescue Metals CEO Dino Otranto said:

We are confident that our approach will drive growth for Fortescue through new, high value products being sold into new markets, ultimately leading to an increase in the number of iron units we sell.

Final thoughts on the Fortescue share price

Now some concrete action can happen to bring its green energy projects to life. It has been building for a while, but it’s good to have some dates for the company to work towards with its green energy production.

I like what Fortescue is doing, and I’m still a shareholder, but I wouldn’t invest while the iron ore price is so strong. It might be best to invest when prices are low.

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At the time of publishing, Jaz owns shares of Fortescue.
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